September Month in Review: Rates remain unchanged at 2.5 per cent

By the resi financial blog team, 03 September 2014

RBA update September 2014

As expected, the Reserve Bank of Australia left the official cash rate unchanged at 2.5 per cent at its September board meeting. Most economists predicted the decision, citing the continuing strong performance of the Australian economy as the main reason.

According to RBA governor Glenn Stevens, recent survey data, which indicates gradually improving business conditions and some recovery in household sentiment after a weaker period mid-year, suggests moderate growth in the economy is occurring.

“Resources sector investment spending is starting to decline significantly,” he says. “Investment intentions in some other sectors continue to improve, though these areas of capital spending are expected to see only moderate growth in the near term.”

Meanwhile, monetary policy remains accommodative and interest rates are very low and have continued to edge lower over recent months as competition to lend has increased. “Investors continue to look for higher returns in response to low rates on safe instruments,” Mr Stevens says. “Credit growth has picked up a little, including most recently to businesses. The increase in dwelling prices continues.”

Recent data shows consumer confidence is rising. The Westpac-Melbourne Institute of Consumer Sentiment shows confidence rose to 3.8 per cent in August. Business confidence has also risen to levels not seen since early 2010. Housing prices are continuing to rise, with Sydney and Melbourne the strongest.

Meanwhile, in the RBA’s semi-annual testimony delivered in August, Mr Stevens suggested growth will likely be below trend over the coming year and that unemployment was unlikely to fall in the near-term from the recently recorded 6.4 per cent annual rate.

All the signs point to the RBA keeping rates on hold for at least the rest of the year so it is a good time to ensure you are happy with your mortgage or whether you could negotiate a better deal. For those considering a loan but have yet to make the leap, this is an excellent time to get on the property ladder.

Categories: RBA update